Publication

Title:
Analyzing Export Readiness of the Vegetables Sector of Bangladesh

Type:
Publication

Reponsible Agency:
Ministry of Commerce

Issuing Date:
01-07-2016

Contents

The study Analysing Export Readiness of the Vegetables Sector of Bangladesh has been undertaken as per the contract (no. CCER/D/GR/2015/30) awarded to Bangladesh Foreign Trade Institute (BFTI) by Swisscontact under the Agri-Business for Trade Competitiveness Project (ATC-P). The objective of this study is to analyse export readiness of the vegetables sector in Bangladesh. To do so, the study provides an account of the vegetables sector, including production, profitability, problems in vegetables production and export, value chain mapping, international market environment, successes in exports and challenges for future export growth, and so forth.

For the purposes of this study, only those vegetable products have been selected where Bangladesh has shown a significant export potential. Thus the study concentrated on the following vegetables: potatoes, tomatoes, eggplants (brinjal/aubergine), pointed gourds (patol), lady’s finger (okra), beans or yardlong beans, cauliflowers, cabbages, and citrus fruits, including lemons and satkora.

The methodology used in the study in collecting data was essentially qualitative in nature. Primary data from the vegetables sector have been collected through interviews with key stakeholders using a Structured Questionnaire (Annex-B). The study also conducted four case studies in order to gain an in-depth insight from specific producers/exporters of their success factors, problems encountered by them and steps taken to overcome those, export readiness of the vegetables sub-sector, and hindrances in exporting vegetables from Bangladesh. In order to have a comprehensive understanding of vegetables export, its potentials/opportunities, impediments and measures needed to promote export, a focus group discussion (FGD), comprising the major stakeholders involved in production, distribution, storage, marketing and exports of vegetables, was conducted at the BFTI. Academics/researchers and think-tanks also participated in the FGD. Collection of data from more than one source (e.g. interview, case study, FGD) helped the study in terms of methodological triangulation.

A careful review of existing literature reveals that Bangladesh has achieved a significant growth in exporting vegetables. The export of vegetables rose from US$ 44.67 million in FY 2008-09 to US$ 147.54 million in FY 2013-14. The country exports vegetables to more than 40 countries, though the expatriate Bangladeshis are the main consumers of our exported vegetables.

This growing trend in export suggests that Bangladesh has significant potential to increase exports of vegetables to international markets, provided necessary measures are taken to comply with the market specific quality standards and that certifications for health and food safety are genuine.

In its attempt to analyse export readiness of the vegetables in Bangladesh, this study made a rigorous analysis of the production and export performances of the sector, challenges accompanying vegetables exports, backward and forward supply chain issues and requirements at the export destinations; it also made an assessment of government policies to address the supply side constraints in vegetables exports.

The study presents the status in terms of production and export performance of the vegetables sector in Bangladesh. It finds that vegetables (potatoes, eggplants, okras, long yard beans, pointed gourds, cauliflowers, citrus fruits etc.) are currently exported from Bangladesh to different countries of the world. Unlike the RMG exports, the export market for Bangladesh vegetables is not concentrated in the markets in the EU and the USA. Market destinations for vegetables widely vary across product bases, as each vegetables product has a different market concentration. The major export markets for our vegetables are the United Kingdom, Malaysia, Saudi Arabia, United Arab Emirates, Singapore, Qatar, Russia, Italy and Kuwait. In addition, the promising markets for Bangladeshi vegetables could be Japan, Canada, Indonesia, Sri Lanka, the United States, Bahrain, and Australia.

The study revealed that the current market infrastructure is inadequate, and that the export of vegetables suffer from a number of constraints, e.g. weak linkages among the supply chain actors (i.e., input suppliers, producers and markets), lack of well-structured and organised markets, dirty wholesale markets without modern facilities, such as warehouses and cold storages, lack of clean water and hygienic space to wash and store vegetables, poor connectivity and transportation system to carry vegetables from production areas to Dhaka city, lack of adequate Cool Supply Chain transport facility (including reefer vans) and perennial traffic jam along all the major highways and in the Dhaka city thoroughfares that affect getting vegetables to the Dhaka airport in time. All these deficiencies/constraints result in the deterioration in quality of vegetables.

Analysis of the policy frameworks and strategies adopted by the Government to support and promote vegetables export shows that the current provision of 20% cash incentives to exporters contributes significantly to sustain exports. The study finds that the relevant GoB organisations, such as the MoA, MoC, DAE, BARI, APBPC, EPB, and HF, have been playing a supportive role in areas, including quality production, product diversification, introduction of new variety, market development, conforming to standards, packaging improvement, provisioning for reefer van, and organising training programmes with a view to raising awareness among farmers and enhancing their knowledge on vegetables production and export. Despite such a supportive role from all relevant agencies, growth in exports of vegetables faces a number of impediments and challenges in producing quality vegetables. These include scarcity in cultivable lands, supply of quality inputs, lack of access to finance, lack of knowledge of appropriate use of fertilisers and pesticides, inadequate knowledge on GAP, and poor post-harvest management.

The study highlighted the role of various development partners, such as KATALYST, USAID, FAO, ADB, World Bank and civil society organisations, in providing financial and technical supports for the growth and enhancement of the vegetables sub-sector. It also elaborated and discussed various determinants of export of vegetables. These include- contract farming, improved quality (pest and disease-free vegetables), attractive packaging, strong SPS regime, and central packing house with cool chain facility and integrity of phytosanitary certificates. Again, the study provided a complete value chain (VC) mapping of the vegetables sector, including an account of key actors, services/inputs, and service providers in the value chain. This section shows that the vegetables value chain can be made more profitable for the farmers by developing contract farming, promoting direct farmer-market linkages, increasing involvement of exporters during production, reducing the use of chemical fertilisers and pesticides/insecticides, adding value through sorting, grading, washing and improved packaging in containers, use of cool chain transports for promoting export, and minimising the role of market intermediaries in the supply chain. Using brinjal as an example, the study also presented a detailed export value chain analysis of that vegetable product. It suggested possible interventions in the brinjal supply chain indicating that farmers’ share in consumer price could be increased by minimising (not eliminating) the role of market intermediaries in the existing supply chain and improved marketing system.

The study

also observed that the export supply chain of vegetables from Shibpur in Narsingdi district can be made more efficient through capacity building of different stakeholders along the chain.

The study also explored the supply side constraints faced in the vegetables exports. These constraints include backward supply chain constraints and forward supply chain constraints. These supply side constraints adversely affect vegetables exports from Bangladesh. Success of vegetables export depends, among others, on the ability of exporters to comply with SPS requirements, traceability and permissible pesticide residue level etc.

Providing a mapping of the international market environment for export of Bangladesh vegetables, this study finds that Bangladeshi vegetables’ penetration in the vegetables markets in Saudi Arabia, United Kingdom, the UAE, Singapore, Russia, Italy and Canada is extremely poor, as its share is less than 1% of the total imports in each of those countries. The share is above 1% only in Malaysia (1.29%), Bahrain (1.12%), Kuwait (2.16%) and Sri Lanka (2.15%). This implies that Bangladesh needs to work hard to enhance its vegetables exports to these markets. The study revealed that China and India are the two largest competitors of Bangladesh in the world vegetables market. It also identified that meaningful horizontal diversification has not been possible in Bangladesh, while vegetables exports have remained concentrated in one product only, viz., potato.

With regard to market entry requirements, the study found that tariff barriers do not pose any threat to access the markets of export destinations, as the applied tariff rate on the export of vegetables to Bangladesh’s major export destinations is either zero or very low. For example, in these major export destinations, Bangladeshi vegetables also enjoy duty-free entry. However, there are numerous NTMs (e.g. SPS and TBT requirements) that are currently imposed by these export destinations. These NTMs, such as phytosanitary measures, packaging and labelling requirements, certification, inspection and traceability requirements, have continued to hamper vegetables exports from Bangladesh. In some cases, governments in export market destinations (e.g., the EU market viz., in the UK, Italy, Germany and France) even imposed ban/restrictions on our exports, as in the case of betel leaf and potato, on health hazard grounds.